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Medical Cannabis in Puerto Rico and Taxation

August 11 2017

The use of Medical Cannabis has been permitted in Puerto Rico since 2015 through the Executive Order No. OE-2015-35, and implemented by the Regulations of the Puerto Rico Department of Health No. 8766, as amended (the “Regulation 8766”). However, on July 9, 2017, the Governor of Puerto Rico signed into law the “Act to Manage the Study, Development and Research of Cannabis for Innovation, Applicable Norms and Limitations” (the “Medicinal Act” or “Act”), also known as Act 42-2017, which legalize and regulate the use of cannabis in Puerto Rico for medical purposes but keeps recreational use prohibited. With this legislation, the new administration creates a robust legal framework to protect the patients, and to address the regulation, control, and oversight of the medical cannabis industry. 

Following is a summary of the most significant changes and requirements under Act 42-2017: 

  • Regulatory Board of Medical Cannabis:
    • The Medical Act established a Regulatory Board of nine (9) members including the Secretaries of Puerto Rico Department of Health, Agricultural Department, Puerto Rico Treasury Department, Department of Economic Development and Commerce, Consumer Affairs Department, the Superintendent of Puerto Rico Police, and three (3) members nominated by the Governor. 
    • The Board will be in charge of the implementation of the law and the establishment the new regulations related to the issuance of the licenses for Patients, Research, Cultivation, Manufactory, Laboratory, Dispensary, Distribution, and Transportation of medical cannabis. They also will have the authority to do inspections and to issue fines, among others. 
  • Prohibitions:
    • The Medical Act prohibits the recreational use of the plant, its flower, or bud. However, upon approval of a Medical Advisory Board, the flower may be available to patients with terminal diseases and where there is no other alternative treatment. 
    • Also, the act of smoking cannabis is still illegal with or without a medical authorization card. However, the vaporization of the medical cannabis is permitted. 
    • No dispensaries are legally allowed to sell any medical cannabis product without the medical authorization card, neither to sell it within one hundred (100) meters of a school or a care center. 
    • The Medical Act prohibits to import or export medical cannabis and is subject to fines and Federal Regulations. All medical cannabis and derived products purchased in Puerto Rico must be consumed in Puerto Rico. 
    • The Act also prohibits the use of medical cannabis in public places. Patients may only consume medical cannabis in a private residence or place. 
  • Regulations:
    • Until a new regulation is approved, the Regulation 8766 will continue as a legal framework for the current medical cannabis industry.
    • Once the new regulations are adopted, the Regulation 8766 will be repealed. The license holders under the previous regulations will have a period of ninety (90) days to renovate their licenses pursuant the provisions of the new regulations.
    • To obtain the licenses for cultivation, manufactory, laboratory, transportation, and dispensary, will be required that fifty-one percent (51%) of the ownership to come from capital contributions of Puerto Rico. 
    • The Medical Act also regulates and promotes the research and development of the medical cannabis, security protocols, confidentiality of the patient’s information, annual reports, job requirements, the timeframe to obtain licenses within the agencies, a Medical Cannabis Registration Program, among others. 
  • Tourism:
    • The Medical Act includes a reciprocity clause that allows dispensaries to serve patients who hold medical cannabis authorization cards from their home states. 
  • Bank Accounts:
    • The Medical Act authorizes the deposits of the income generated by the medical cannabis industry in Savings and Credit Cooperative of Puerto Rico, regulated by the Credit Unions Supervision and Insurance Corporation (“COSSEC”) or any other financial institution not regulated by the Federal Deposit Insurance Corporation (“FDIC”). 


As a result of the Medical Act, the Puerto Rico Treasury Department (the “PRTD”) issued, on July 20, 2017, Administrative Determination 17-06 (the “AD 17-06”) to provide guidelines on the application of the Sales and Use Tax (“SUT”) to the medical cannabis and derived products. Consequently, AD 17-06 established the following: 

  • Medical cannabis and derived products will be considered as a taxable personal property. 
  • Accordingly, even though medicine is not taxed in Puerto Rico, medical cannabis will be subject to the 11.5% SUT.
  • Medical cannabis industry will be subject to all fiscal requirements, such as the collection and remittance of SUT, the SUT monthly returns, tax on imports monthly returns, provide at least two (2) alternatives of payment to their clients, install and maintain a SUT reporting terminal regardless of the volume of business, among others. 
  • All merchants within the medical cannabis industry will need to register and apply for their Merchants’ Registration Certificate within the Internal Revenue’s Unified System (“SURI” for its acronym in Spanish), under one of the following NAICS Codes, subject to a $10,000 penalty: 





Food Crops Grown Under Cover



Other Farm Product Raw Material Merchant Wholesalers

Manufactory and Distribution


All Other Miscellaneous Store Retailers



Testing Laboratories



Specialized Freight (except Used Goods) Trucking, Local       


All merchants engaged in the medical cannabis industry that hold an active Merchant’s Certificate under a different NAICS Code will have until August 31st, 2017 to update their Certificate under one of the new NAICS Code as mentioned above. Noncompliance with this requirement will be subject to a $500.00 penalty.


Pursuant the AD 17-06, the public policy of the current Administration is that entities engaged in the Medical Cannabis Industry will not be eligible to enjoy the benefits of the following Tax Incentives Acts or SUT Exemptions: 

  • Act 73 of 2008, as amended, known as the “Economic Incentives for the Development of Puerto Rico Act” as well as the Manufacturing products exemption; 
  • Act 225 of 1995, as amended, known as the “Puerto Rico Agricultural Tax Incentives Act including the Bona Fide Farmer exemption; 
  • Act 168 of 1968; as amended, known as the “Hospital Facilities Tax Incentives” as well as the Machinery, medical equipment, supplies, articles, equipment and technology related to the health services exemption;
  • The food, food ingredients, and prepared food exemption; 
  • Prescription drugs exemption, since the medical cannabis is provided by a recommendation of use, not a medical prescription. 

However, the medical cannabis’ merchants that acquires taxable items for resale may be eligible to obtain a Reseller Certificate and the Municipal SUT Exemption Certificate. 

To discuss these matters in the context of your circumstances, please contact one of our Tax Advisory experts.